Peripheral vascular disease (PVD) affects up to 20% of the general population. The resulting morbidity in the form of leg pain, immobility and amputation can be devastating. One year mortality in patients with critical limb ischemia is 25% with approximately 30% of patients requiring amputation. Patients with diabetes are approximately three times as likely to have PVD. While there is no definitive treatment for PVD, the only therapies available are surgical, such as endovascular interventions with stents or vascular bypass grafts. Despite these interventions, up to 34% of patients experience limb loss by 12 months. Clinical trials involving gene and cell based therapies have demonstrated safety but have not proven to be beneficial in preventing amputation. Studies from our laboratory and others suggest that paracrine factors secreted by implanted stem cells facilitate blood vessel formation in vivo through secretion of angiogenic factors. Hemoxygenase-1 (Ho-1) is a multifunctional protein that improves cell survival and induces secretion of pro-angiogenic factors such as Vascular Endothelial Growth Factor (VEGF) and Stromal cell Derived Factor-1 (SDF-1). In Aim 1, we plan on using alginate-encapsulated stem cells that overexpress Ho-1 to determine if we can further enhance blood vessel formation, increase blood flow, and preserve tissue function. In Aim 2, we propose to investigate contributing factors involved in improving revascularization including improved homing of endothelial progenitor cells. In Aim 3, we will evaluate the benefit of these Ho-1 overexpressing stem cells in mice with diabetes, where blood vessel formation is greatly impaired. Given that stem cell therapies are gaining momentum in various fields, our combined gene and cell therapy approach delivers a logical next step in providing sustained pro-angiogenic stimuli for local therapy while segregating genetic material from the recipient. Furthermore, if proven to be beneficial in diabetic patients, this approach could be applied in regenerative medicine to a wide range of cardiovascular diseases including heart attack and stroke.